Thursday, June 4, 2009

Several people whom I respect have approached me -- independently -- in recent weeks with speculation that some sort of combination or merger of Orbitz and Kayak would make sense.

The speculation speaks to the power of travel search.

I say the following only somewhat facetiously, but the travel industry is almost getting to the point where almost nobody will be selling travel anymore -- all of the travel businesses will be building platforms to enable consumers to search for travel instead as part of their ever-growing advertising/media strategies.

Think of Google, which sells huge amounts of travel advertising, but doesn't own a travel business.

Speculation has been rife that Orbitz, the weakest sister among the online travel agencies, is in play. When Expedia eliminated flight-booking fees, taking away a huge chunk of Orbitz's revenue, the prognosticators offered a scenario that perhaps Expedia would buy Orbitz or maybe Travelocity and Orbitz would join forces.

But, the Orbitz-Kayak merger theory posits that Orbitz could build a profitable search business in tandem with Kayak's metasearch platform if Orbitz downplayed its transaction business and leveraged the huge amount of air and hotel searches that consumers already are conducting on its global websites.

For Kayak, a merger of some sort with the larger and search-query-rich Orbitz brand would give Kayak even greater scale, including in markets like the U.K., where Kayak's effort have been sluggish.

I wrote in this blog recently, how Pegasus Solutions found that its system gets 1,900 hits from travel lookers for each booking conversion.

In this regard, travel businesses across the spectrum are trying to grow and monetize their advertising/media platforms as an alternative to their fickle, competition-laden transaction businesses.

From a financial standpoint, I don't know how a Kayak-Orbitz merger would work.

Orbitz, saddled with debt and struggling, has limited options. And, although Kayak acquired SideStep for around $200 million in 2007, an outright purchase of Orbitz would seemingly be cost-prohibitive, given Orbitz's huge debt load.

Still, wiser heads than mine are telling me that the financial folks can figure out a formula for getting an Orbitz-Kayak combination done.

Such a deal would speak volumes about the evolution of the travel business.

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I've followed online travel, its twists, turns and detours, since the beginning (not Adam and Eve, but Rich and Terry), and will follow the aforesaid in this blog. I'm North America editor of Tnooz and I write USA Today's Digital Traveler column. Things not in my resume: I visited Orbitz headquarters pre-launch in 2000 and, left unattended, eavesdropped and examined the whiteboards to learn partnership details; Travelocity's ex-CEO Michelle Peluso credits me with her success (Wharton notwithstanding) after I wrote a sentence (with accompanying photo) mentioning that some of her Site59 women wore fishnet stockings and then airline execs kept the phone lines busy; I once drove to tiny Sherman, Conn., to see where PhoCusWright lives; and I was a nachtportier in a West Berlin hotel in the days (Btw) when a nasty wall split the city. Fyi, the previous stuff wasn't necessarily in chronological order.

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The opinions I express in the Dennis Schaal Blog are my own. Only I could think of this stuff. The opinions uttered or written here in no way reflect on the views of past employers, current partners, future associations (how could they anyway?) or my first-grade teacher, Mrs. Slayton. I don't have a lawyer, but if I had one, he or she probably would have told me to write something like this. Well, maybe not exactly. The Dennis Schaal Blog is Copyright (c) 2009 by Dennis Schaal. All rights reserved.